“The Reserve Bank is currently working on an appropriate performance evaluation framework to enable evaluation of the impact of microfinance activities and facilitate appropriate policy intervention,” Gono said.

“A draft Microfinance Bill is currently under consideration by the Reserve Bank, the ministry of Finance and other microfinance stakeholders.

“The Bill once promulgated is expected to address some of the problems facing the sector such as tenure of licences, consumer protection issues and transparent pricing in line with international developments in the microfinance sector.”

Microfinance companies are already in trouble with defaulting clients, with lending institutions resorting to unethical practices to recover their moneys from bad debtors.

“The Reserve Bank continues to receive complaints from microfinance clients regarding unethical and undesirable business practices such as inadequate disclosure of business conditions and abusive debt collection practices including disposal of pledged collateral without following due legal procedures,” said the central bank chief.

A CRB ascertains the credit worthiness of individuals and provides lending firms and institutions with information on credit applicants.

Gono’s pronouncements come after reports that the market has often taken advantage of the absence of a CRB to borrow money without capacity to repay and thereby resulting in defaults.

More businesses have introduced credit facilities as a result of the stable multiple currency regime which was adopted in 2009.

However, over indebtedness has also become widespread with local banks feared to run the risk of over-lending.
According to RBZ figures, banks have lent a total of $2,8 billion to the private sector as of November 2011, 84,3 percent up from $1,5 billion in November 2010.

Individuals accounted for 15, 8 percent of total loans and advances as at December 2 last year while mining and agriculture received a total 6,4 percent and 16,2 percent of allocations respectively.

Manufacturing and services received a combined 33 percent while construction, communications sector, financial firms and transport received a combined 12 percent.

“Against the background of expanded credit and growth in the deposit base, the loan to deposit ratio increased appreciably from 61,9 percent as at December 31 2010 to over 71,7 percent by end December 2011 (and) if offshore lines of credit are included the loans to deposit ratio for December 2011 exceeds 87 percent.”

Banking sector credit has however largely been short-term in nature, consistent with the transitory nature of deposits coupled with the attendant liquidity challenges.